Getting a mortgage with bad credit can be difficult, but it is not automatically off the table. Your options depend on your credit score, payment history, income, debts, down payment, loan type and the property you want to buy.
There is no single mortgage definition of “bad credit.” Many lenders treat scores in the low 600s differently from scores in the 500s. A borrower with a 620 score, steady income and low debt may have very different options than a borrower with a 540 score, recent late payments and limited savings.
The best mortgage option is usually the one that fits your full financial profile, not just your score. FHA, VA, USDA, conventional and some portfolio loans may all be worth comparing depending on your eligibility.
Bad Credit Mortgage Options Basics
| Mortgage Option |
Credit Score Context |
Best Fit |
Main Trade-Off |
| FHA loan |
HUD says borrowers with a minimum decision credit score of 580 or higher are eligible for maximum financing. Scores from 500 to 579 are limited to 90% loan-to-value. |
Borrowers with lower credit scores who can document income and meet FHA requirements. |
FHA mortgage insurance applies and lender overlays may be stricter than FHA’s minimums. |
| VA loan |
The VA says it does not require a minimum credit score, but lenders may set their own credit score limits. |
Eligible service members, veterans and qualifying surviving spouses. |
You need VA eligibility, satisfactory credit, sufficient income and lender approval. |
| USDA loan |
USDA lenders review whether credit history shows the ability and willingness to repay, and lenders may apply additional criteria. |
Low- and moderate-income buyers purchasing an eligible primary home in an eligible rural area. |
Income, property and lender requirements can limit eligibility. |
| Conventional loan |
Fannie Mae lists 620 for manually underwritten fixed-rate loans and 640 for manually underwritten ARMs, while Desktop Underwriter casefiles do not have a single minimum score requirement. Freddie Mac also separates automated underwriting from manual credit-score requirements. |
Borrowers near or above common conventional credit benchmarks with stronger overall files. |
Pricing, mortgage insurance and approval can be harder with lower scores. |
| Portfolio or non-QM loan |
Credit standards vary by lender and product. |
Borrowers who do not fit standard agency loan guidelines. |
Rates, down payment requirements and fees may be higher. |
What Counts As Bad Credit For A Mortgage?
Bad credit is not a formal mortgage category. Lenders usually look at your credit score alongside the details behind it, such as late payments, collections, charge-offs, bankruptcies, foreclosures, credit utilization and the age of your accounts.
A score in the 500s may limit your choices and make FHA the most realistic starting point for many borrowers. A score in the low 600s may open more options, especially if you have stable income, manageable debts, a larger down payment or strong cash reserves.
Your recent credit behavior often matters as much as the number. A 620 score with clean payments for the past 12 months may be viewed differently than a 620 score with recent mortgage lates or new collections.
FHA Loans: Often The Most Flexible Bad Credit Mortgage Option
FHA loans are often the first place borrowers look when their credit score is too low for a conventional loan. FHA credit rules can allow more flexibility, especially for borrowers with scores in the 500s.
HUD says a borrower is not eligible for FHA-insured financing if the minimum decision credit score is below 500. If the score is between 500 and 579, the borrower is limited to a maximum loan-to-value ratio of 90%, which generally means at least 10% down. If the score is 580 or higher, the borrower is eligible for maximum financing, which is commonly associated with 3.5% down for FHA purchase loans.
That does not mean every lender will approve a borrower at FHA’s minimum. Lenders can set overlays, which are stricter requirements than the program minimums. A lender may require a higher score, lower debt-to-income ratio, more reserves or a cleaner recent payment history.
FHA loans also require mortgage insurance. That can make the monthly payment higher than some borrowers expect. FHA may still be a good fit if the flexible credit guidelines make approval possible, but mortgage insurance should be included in any cost comparison.
FHA May Work Well If
- Your credit score is below common conventional benchmarks.
- You have at least 3.5% down with a 580 or higher score, or at least 10% down with a score from 500 to 579.
- Your recent payment history is improving.
- You can document stable income and meet FHA debt and property requirements.
VA Loans: A Strong Option For Eligible Borrowers With Credit Challenges
VA loans can be one of the strongest options for eligible borrowers with imperfect credit. The VA says it does not require a minimum credit score, although lenders may set their own credit score limits.
VA eligibility is limited to qualifying service members, veterans and certain surviving spouses. The VA also says borrowers need satisfactory credit, sufficient income and a valid Certificate of Eligibility, and the home must be for the borrower’s own occupancy.
The key point is that “no VA minimum score” does not mean automatic approval. Lenders still review credit history, income, residual income, debts and the property. If your score is lower, the lender may look closely at whether your recent payments show that the credit issues are behind you.
VA May Work Well If
- You are eligible for VA financing.
- Your credit score is below conventional norms but your income and recent payment history are stable.
- You have limited down payment savings.
- You can meet the lender’s residual income and underwriting requirements.
USDA Loans: An Option For Eligible Rural Buyers
USDA loans can help low- and moderate-income buyers purchase eligible primary homes in eligible rural areas. USDA describes the Section 502 Guaranteed Loan Program as a way for approved lenders to help low- and moderate-income households buy adequate, modest, decent, safe and sanitary homes as their primary residence in eligible rural areas.
USDA credit review is not based only on a single score. USDA’s technical handbook says the credit history must demonstrate the applicant’s ability and willingness to repay the loan, and lenders may impose additional criteria or overlays at their discretion.
USDA can be useful if your main barrier is cash for a down payment, but the program is not available everywhere. The home must meet location and property requirements, and household income limits apply.
USDA May Work Well If
- You are buying an eligible home in an eligible rural or suburban area.
- Your household income is within USDA limits.
- You have limited down payment savings.
- Your credit history can support repayment, even if your score is not perfect.
Conventional Loans: Possible With Fair Credit, Harder With Bad Credit
Conventional loans are not backed by the FHA, the VA or the USDA. Many conventional loans follow Fannie Mae and Freddie Mac standards. Fannie Mae and Freddie Mac are government-sponsored enterprises that buy mortgages from lenders and set many conventional loan guidelines.
For Fannie Mae, manually underwritten fixed-rate loans generally list a 620 minimum credit score, while manually underwritten adjustable-rate mortgages list 640. Fannie Mae also says a minimum credit score is not required for Desktop Underwriter, or DU, casefiles because DU evaluates creditworthiness through the full risk profile. Freddie Mac’s Loan Product Advisor, or LPA, also separates automated underwriting from manual or non-LPA credit score requirements.
In practice, many borrowers still see 620 as an important conventional-loan benchmark because lender overlays, mortgage insurance pricing and automated underwriting results can make lower-score conventional approvals difficult. Even when approval is possible, a lower score can increase the interest rate, fees or private mortgage insurance cost.
Conventional May Work Well If
- Your score is near or above common conventional benchmarks.
- You have a larger down payment or strong cash reserves.
- Your debt-to-income ratio is manageable.
- You want to compare private mortgage insurance costs against FHA mortgage insurance.
Portfolio And Non-QM Loans: A Backup Option For Some Borrowers
Portfolio and non-qualified mortgage, or non-QM, loans may be available for borrowers who do not fit standard agency loan rules. These loans are not the same as FHA, VA, USDA or standard conventional loans. The lender’s own criteria matter more.
These products can sometimes consider alternative documentation, recent credit events or more complex income. They may also come with higher rates, larger down payment requirements, higher fees or stricter reserve requirements.
These loans are usually better viewed as a fallback option, not the first place to start. If you can qualify for FHA, VA, USDA or conventional financing, compare the full cost before choosing a portfolio or non-QM product.
How To Compare Mortgage Options With Bad Credit
When comparing mortgage options with bad credit, do not focus only on the minimum score. The better question is whether the full loan structure fits your budget and risk profile.
| What To Compare |
Why It Matters |
| Minimum down payment |
A lower score may require a larger down payment, especially with FHA scores from 500 to 579 or non-agency options. |
| Monthly payment |
A loan with easier approval may still be too expensive once mortgage insurance, taxes and insurance are included. |
| Mortgage insurance or funding fees |
FHA, conventional, VA and USDA loans handle insurance and program fees differently. |
| Recent credit history |
Recent late payments, collections or major derogatory events can matter even if your score meets a program threshold. |
| Debt-to-income ratio |
High monthly debts can limit approval even if your credit score is acceptable. |
| Lender overlays |
A program may allow a lower score, but the lender may require a higher one. |
Ways To Improve Your Mortgage Options Before Applying
If your credit is close to a key threshold, a few months of focused work may improve your options. The goal is not just a higher score. It is a stronger overall file.
Pay Down Revolving Balances
Credit card utilization can affect your credit score and your monthly debt picture. Paying down revolving balances may help your score and lower your debt-to-income ratio.
Bring Past-Due Accounts Current
Recent late payments can be a major red flag. If possible, bring accounts current and avoid new late payments before applying.
Check Your Credit Reports For Errors
AnnualCreditReport.com is the official site for free credit reports, and free weekly online reports are currently available from Equifax, Experian and TransUnion.
Avoid New Debt Before Applying
New credit cards, auto loans or personal loans can affect your score, monthly debts and underwriting result. Keep your credit profile stable while preparing for a mortgage.
Build A Larger Down Payment Or Reserves
More cash can help offset risk in some loan files. A larger down payment may reduce the loan amount, and reserves can show that you have money left after closing.
The Bottom Line
The best mortgage option for borrowers with bad credit depends on eligibility, score range, down payment, income, debts and recent credit history. FHA loans are often the most flexible starting point for lower scores. VA loans can be powerful for eligible borrowers. USDA loans may help eligible rural buyers. Conventional loans may become more realistic as your score and overall file improve.
A low credit score does not always mean you cannot buy a home, but it does mean the details matter. Compare loan types, understand the trade-offs and consider whether improving your credit before applying could lead to better terms.
Frequently Asked Questions
Can I Get A Mortgage With Bad Credit?
Possibly. Approval depends on your credit score, recent payment history, income, debts, down payment, loan type and lender requirements. FHA, VA and USDA loans may offer more flexibility than conventional loans for some borrowers, but no program guarantees approval.
What Is The Best Mortgage For Bad Credit?
FHA is often the most flexible option for borrowers with lower credit scores. VA may be stronger if you are eligible. USDA may work if your income and property qualify. The best option depends on your full financial profile, not just your score.
Can I Buy A House With A 500 Credit Score?
An FHA loan may be possible with a minimum decision credit score from 500 to 579, but HUD limits those borrowers to 90% loan-to-value, which generally means at least 10% down. Lenders may also require a higher score.
Can I Buy A House With A 580 Credit Score?
Possibly. HUD says borrowers with a minimum decision credit score of 580 or higher are eligible for FHA maximum financing. That does not guarantee approval, because lenders still review income, debts, payment history, property eligibility and any overlays.
Does The VA Have A Minimum Credit Score?
The VA does not set a universal minimum credit score for VA home loans. However, lenders may set their own credit score limits and still review your credit history, income, residual income and overall ability to repay.
Can I Get A USDA Loan With Bad Credit?
It may be possible, but USDA approval depends on more than the score. USDA lenders review whether your credit history shows the ability and willingness to repay. The home must also be in an eligible area, and household income limits apply.
Is Conventional Or FHA Better For Bad Credit?
FHA is usually more flexible for lower credit scores. Conventional loans may be better if your score is stronger and you can qualify for better pricing or lower mortgage insurance costs. Compare both options if your score is near conventional benchmarks.
Should I Improve My Credit Before Applying For A Mortgage?
Often, yes. Improving your score may expand your loan options, reduce your rate, lower mortgage insurance costs and improve your underwriting result. Paying down revolving debt, avoiding new credit and keeping all accounts current can help strengthen your file.
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